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Store in Keangnam Landmark Tower closed due to continued losses and high rental. - Pic courtesy of Dat Viet
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KUALA LUMPUR, Jan 8:
Parkson Holdings Bhd remains positive on the retail market in Vietnam despite the recent closure of its Parkson Keangnam operations due to low performance.
A Parkson spokesperson said: “We have temporarily closed the Parkson store in Keangnam Landmark Tower in Hanoi as it has been incurring losses since its opening three years ago, mainly due to the high rental costs and low traffic.
“Parkson remains positive on the retail market in Vietnam as can be seen in the opening of Parkson store in Danang in central Vietnam on Jan 11, as part of our expansion plans.”
Parkson Retail Asia, the holding company of Parkson Vietnam, has suffered a sharp 33.1% decrease of net profit at RM18.43 million in the third quarter of 2014 as compared to previous corresponding period of the year due to low sales in Vietnam.
Chief executive officer Toh Peng Koon has reportedly said that while sales had been growing in Indonesia and Myanmar, Parkson has faced difficulties in other markets, including Vietnam.
The rise of many new competitors and low spending by Vietnamese consumers has led to a drop in the growth rate of the retailer.
Reports also point towards the opening of Parkson shopping malls in non-central business districts which has led to its growth slowdown.
Despite poor performance, AmBank Research has a reaffirm “buy” stance on Parkson with an unchanged fair value of RM3.40 per share and remains bullish on the retailer.
In a statement it said: “We are not surprised by the temporary closure of this loss-making store given Parkson’s proactive store management.
“This is seen as a positive move, in our view, given this store has been loss-making since its opening three years ago, largely due to high rental cost and low footfall traffic.
“We believe that the swing factor for an improvement in Vietnam’s operation largely hinges on the closure of this loss-making store, in addition to its strategy to improve merchandising mix.”
According to AmBank, the operating losses for Vietnam and Myanmar doubled to RM3.1 million in first quarter of 2015 while Vietnam’s SSSG contracted to 5.5% decrease in the same period.
Currently, Parkson has a total of nine stores in Vietnam including that in Hanoi Landmark Tower.
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